Across the Capitol, the Democratic chairman of the House Ways and Means Committee, Rep. Charles Rangel of New York, endorsed the plan crafted by Sen. Max Baucus, D-Mont., and Sen. Charles Grassley, R-Iowa, saying his panel would closely examine the issue.
"The nature of investment vehicles is changing right before our eyes, and the tax code must keep up with the times," Baucus said in a statement.
The bill he and Grassley proposed could double the tax burden for Blackstone and other private-equity firms that go public because corporations pay their own income taxes and their shareholders pay capital gains taxes on their investment. Investment partnerships and their partners, by contrast, pay only one level of tax, on their shares of the income generated.
"Creative new structures for investment vehicles may blur the lines for the tax treatment of income," Baucus said. "We must make the law clear and apply the law fairly, or risk the erosion of our corporate tax base.."
Baucus and Grassley sent letters to Treasury Secretary Henry Paulson and Christopher Cox, the chairman of the Securities and Exchange Commission, saying that the Blackstone IPO raises serious tax questions that must be resolved soon.
The SEC has been reviewing Blackstone's planned IPO.